"After a country defaults, it still has to cut its budget deficit back to zero -- it still has the same issues to combat," O'Leary says. "Then it adds to its difficulty the problem of borrowing. We would shut ourselves out from lending markets. The consequences of defaulting don't solve the problem -- in fact, they just make it worse."

The current austerity path is the best one, in O'Leary's opinion. "The Government has an agreed plan with the EU to cut the budget deficit by 2014. The next stage of that plan is the December Budget."

Any serious default plan would mean leaving the eurozone, said Michael Cummins, as the EU would not let Ireland go under and endanger the entire euro project or risk triggering contagion.

"It's a decision that will probably be taken out of our hands," he says. "Greece was heading in that direction and the EU wouldn't let it happen. There could be a reversal of that view in years to come, but not at present."

"In the context of the eurozone I don't think it's very likely that we could default," adds Cummins, "and exiting the eurozone would be very costly for Ireland."

As for a default on the Anglo debt or part of it, the damage it would do to our borrowing leverage means it's not worth it, in Cummins's view. "The world is now watching what's happening with Anglo. If Ireland wants to borrow €25bn a year for the next number of years, then the answer is 'no' to repudiating that debt.

"The big danger with the nuclear approach is that it would create bigger noise around Anglo. You don't want to create grey clouds around it in the coming months while so much is happening, with lots of milestones coming along in the next three months: the bank guarantee review, Nama haircuts, AIB needing to raise capital and sell assets."

Michael Hennigan, of financial website Finfacts, says: "Governments are reluctant to allow sovereign entities to default. For example, the giant property firm Dubai World, owned by the government of Dubai, has rescheduled payments but has not defaulted.

"The Government should seek agreement with Anglo bondholders to reduce taxpayer exposure, but while the option of default may be popular, it would be a risky move.

"One disgruntled bondholder could petition the High Court for the winding up of Anglo and an early liquidation could force a fire sale of loan collateral, repayment of deposits in full and big losses for the State. Argentina was locked out of international markets because a minority would not accept an offer of 33 cents to the dollar in 2005.

"Like Greece, we depend on foreign lenders to fund about 80 per cent of our public debt and the NTMA plans to raise about €25bn in 2011.

"Irish bond spreads would jump and it is very likely that the ECB would oppose a default because of the risk that the €750bn sovereign debt support mechanism that was agreed with the IMF last May would unravel. We'd be forced to use the support mechanism and the IMF would move into Merrion Street."

Defaulting on Anglo debt could risk bigger losses while paying down the overall public debt will be a challenge without IMF intervention, says Hennigan, though he adds tellingly: "The political class will not want this option as long as the debt can be funded."